tv Bloomberg Business Week Bloomberg April 24, 2016 4:00pm-5:01pm EDT
"bloombergome to businessweek." david: i'm david gura. carol: and i'm carol massar. we are inside headquarters. david: we are at amazon. carol: it is all ahead on "bloomberg businessweek." ♪ carol: we are here with "bloomberg businessweek's ellen pollock. dealing with the internal borders. : it was the part where all
of the borders were taken down, and the european union was flow's so there would be of goods and people, and it meant that workers could cross borders, and now, in the wake of all of the terrorism, some of those borders have gone back up. david: what are the effects we are seeing from that? trying to get to the austrian hungarian border. : it really is causing problems because it takes longer for goods to get to places, and people are paying for trucks longer, and the estimate is it will cost $500 billion and an extra cost in gdp because people cannot get across these borders, and france has put up borders, germany, austria, sweden, and they are not everywhere, but there are more than the were a few months ago. david: you were looking at the area around chernobyl, and there was a report on this.
radioactives activity from 30 years ago. : the original container put around the damaged plant was not meant to last forever, and so they have been building a new structure, which they are calling -- it has a fancy name, but it is an arch, and it slides over it with frames underneath it to deal with evaluating the radiation, and this entire town nearby basically exists to serve as the completion of this incredible equipment. and it is the business of the town. has got its ukraine own problems, in terms of dealing with the economy and just be political. ellen: the ukraine was handling it, and now they are in a war with the russian backed rebels, and become the -- country is
upset. sums ofcosting huge money, and they are getting international aid, but it has been a long, slow process. this radiation is a very serious problem. some of the construction is already done, but there are other stages that still have to be done. most: they talk about the powerful prints in saudi arabia. ellen: he is a deputy crown prince. he has huge amounts of government responsibility, and ultimately, he is in charge of starting a company, but i do not think he runs it day by day. to one of theed people. arabia, he of saudi in a very short amount of time had consolidated power. be deputy crown
prince, which puts him second in , and he hasthrone basically been given portfolios by his father over the economy, and the oil industry, the defense industry, and he is unveiling what is pretty much the biggest redo of the saudi economy for decades. up wanting to be the next steve jobs, so to speak. in the interviews that he has given us, he talked a lot about technical revolution, what it means for people his age, 30-year-olds who constitute more and half of the population, the biggest scoop really to come out of this these that we have gotten, these interviews, is we always knew that they were under pressure under the past year or so, that they are running out of finances.
they had several billion dollars of foreign reserves. what they told us is that a year ago, they realized that their burn rates are getting to a place where they would be 2017,pt by ohley -- early and they said they would be out of money by maybe 2021 or so. they thought they had five years. had five thought they years, but the tooth is, they theless than two, so over last 10 months, the prince has significantly reduced spending. he has put a lot of efficiencies in place. we sat down with, among others, his financial advisor, who is going through some of the details about how inefficiently the kingdom was spending money, whenally in the boom years oil was hovering in the $80, $90, $100 or so range. it was just going out, and it was not being kept account of very well, so he has done a lot
in that regard to slow the earn rate from, i think it was like $30 billion a month, down to something around eight or so, so he has bought them some time, but that does not mean that they are out of the woods. inid: what is his plan, broad strokes? wants to move the position to where it is oil. it is a big one but no longer the majority. he was to try to compel foreign investment. he wants to create job opportunities by expanding the private economy, which is not very existence right now. : he is also thinking about the rights of women, social reforms, women driving, which has been something that has not even happened in that society and is not even considered. smart to know there are third real issues that will
certainly take time, and that is one of them. women enjoy rights in islam that they have not yet gotten in our society, which i think is really interesting and cut right to the core of the saudi society that is very wealthy and well-off, and yet super religiously conservative, and you have a generation that i think sees themselves in the which increasingly defies embarrassment, especially as they go around the world with the role of women in society there. david: he is pushing for so much innovation. do we have a sense of how warmly these saudi arabia and people are taking that? who you talk on to. saudi arabia is not just a group of a few people. there are thousands of people in and who aremily paid out of basically a kitty that sits between the treasury and a company, and a lot of
these people will be getting a lot less money down the road, a country the population of 30 million, where half of them are educated -- let's remember all of the efforts of the past 20 years or so that this kingdom has made to educate their people. they are educated, and there is not enough to do, and so for the first time, someone is in power is talking about these things. david behind every cover story, : there is a story itself. carol: we talked to the photographer herself. >> the photo director hired a very seasoned photographer who -- to photograph and to document how the prince goes about running his country. he came back with various options of the prince looking very relaxed, on an ipad, sitting in his living room, and without his like -- sort of --
traditional headdress and kind of like clothing you would associate with a figure of such power. carol he went for the closer : shot that we don't normally see, right? tracy right. : that only is this a much more graphic image of the young prince, you can also see that his facial features are just relaxed and something unexpected from such a powerful person. and we are also used to seeing powerful figures based in opulence. we went for this more unusual shot. david: what do you want to convey for someone who sees this cover? tracy we opted for a smaller : typographic treatment. the first thing you see, you see the prince is very young. as you read the language, he is in charge of such a big task. "bloombergext on
♪ carol: welcome to "bloomberg businessweek." i'm carol massar. david: and i'm david gura. there are a number of things that has trump name on them but are not sanctioned. one of them is trump champagne. trump coins as well, a guy who makes no bones about all the money he has made. some of the oath making coins with donald trump's name on them. he has not sanctioned that neither. and then we hear so much about the wall along the u.s./mexican border. builttly, they have not any fences yet. they have made merchandise. three examples of a lot of people using the trump name without donald trump's permission. thel: i understand at
patent and trademark office, the have got a lot of people wanting to use the trump brand. a lot of people wanting to capitalize off of his popularity. david: the whole process of doing that takes about a year or so, and it would be past the election. carol: and the features section, there is a story about failed trump vodka. we spoke to a reporter. max: when i wrote about how donald trump had this magnificent rise thanks to the use of some debts with his casino and real estate empire in 19 80's, a very dizzying, very amazing rise, and then what a fall in the 1990's. he almost failed. and then he was loading his name out, which meant he was not building buildings that were crawled trump, it also meant he was licensing trump pinstripe suits and the trump fragrance,
and then at the end of 2005, trump vodka. david: what was the market supposed to be? max: mary high-end. -- very high-end. they had one in the netherlands, and it was like a small, struggling distillery. david: so what is with it? it had a short life? max: it sold about 40,000 bottles in the first month, and people were excited. it was a spectacle. there were parties in miami beach and at trump tower, so it started out well. good times. a the end of 2007, there was line that says we are going to move our bottle production to china. carol: oh-oh.
max: just to cut costs. maybe not the end of the world, but a sign that things were not good. as a financial crisis started, and i reported this story also thanks to public filings, because this was a public company, and you can see that like the beer bottle is going to be less profitable, there are less direct sales, and you could see this as the crisis happens. sale? is it still for max: because the distillery that i ended up telling you about, it ended up going bankrupt in 2010. trump ended up suing. he said he was not getting the money he was promised. carol: so he was suing them? rim of her, he was
just supposed to be paid. half of the prophets, if i am remembering correctly, and he said that the company, they were not paying him, so he sued, and trump vodka is appeared in the u.s., except for this brilliant liquor salesman who just saved a bunch. he is selling them for around $30. dayton: up next, herbalife. carol carol: restaurants find : inspiration from the grocery store. all that, coming up next. on "bloomberg businessweek or quote ♪ "bloomberg businessweek." ♪
a look at how herbalife has helped well-known athletes. david: here is reporter matt townsend. >> any company trying to create a brand and sell products, the -- they have associated themselves with high-profile people, and that has basically got an associated with people and david beckham and one of public figures like former secretary of state madeleine albright. again, this is what they do. it is associated with another brand, a person you think would be attractive to your customers. david: you mentioned soccer? reporter: yes. herbalife has a big presence into latin america and further into asia. what is the most popular sport in all these places? soccer, by far, especially in south america. carol: the logo is on the jerseys, so they are front and
center. reporter: yes, and a big deal was with the la galaxy. in the got david beckham, who was really, really popular. he was the most popular person in soccer, and he was wearing the jersey. who is driving the brand? reporter: it is the ceo, michael johnson. he came in the middle of the last decade from disney and said, let's turn this company, which was known for weight loss shakes, into a sports performance brand. he has done that by associating them with athletes, mainly soccer. to branch out into other products. they do things like sports nutrition, protein powders,
energy drinks. they really see herbalife is a sports performance brand. almost, and they have even said that someday they would like to have their logo as sort of an herbal leaf, unlike nike. -- like the nike swoosh. carol: part of the argument, by having people liked david beckham another well-known people, it does give the brand some legitimacy. reporter right. :and one of the things he talks about is, you know, the big lie is easier to believe then be little lie. he has even compared herbalife to made off -- bernie madoff. it is a publicly traded company, and it has people like madeleine albright speaking on behalf of of the company, it helps perpetuate -- this big thing, what he says is a pyramid scheme. he says they are legitimate company.
and acumen is just out to make good on his investment, which he is, sending the company's stock down. carol: in this week's etc. section. >> chefs want suppliers to be able to not only give them food to serve in the restaurant, but to sell for people to take home because they don't have the capacity to do it. across the country, we are seeing this with everything from fast food to seafood restaurants. david: is this stuff that you take home and heat up? or are we talking about a charcuterie platter? reporter: they sell something called a sunday gravy you can take home and heat up. [laughter] >> i mean, if you are really hungry, you can scoop it out. but you probably want to heat that up. at a restaurant in virginia, you
david: welcome to "bloomberg businessweek." i'm david gura. carol: and i'm carol massar. david: where amazon chooses to provide same day delivery. carol: how to resuscitate the cap? it is all ahead on "bloomberg businessweek." ♪ david: we are here with the editor of "bloomberg businessweek," ellen pollock. anymore must reads, starting with a feature on amazon. the graphic accompanying it are so amazing showing the delivery areas for same-day delivery for amazon. ellen this was a project some of : the graphics team at bloomberg and the editors and reporters at "bloomberg businessweek." what we did was look at where amazon's
one-day delivery service is, their prime one-day delivery service. david: something they are really pushing right now. ellen: yes. something they are really pushing. and we looked at where the services were available and matched it to u.s. zip codes. and what we found was that in many cities, or several cities, there were areas that were largely populated by black consumers who get the eligible to service because they only delivered to other parts of the city and they didn't serve , these areas. david: especially stark in atlanta, and washington, d.c. ellen: boston and atlanta. in boston, you can get the service, but there is a hole in the middle of a largely black community were you cannot get the service. there was no evidence at all that amazon was out to discriminate in any way.
they were looking at data. the story said something about how if you are only looking at data and not looking at the people, you can and up under serving black communities. it raises a lot of questions. leaders will have to take away they wish. but there are some stark examples. and, of course, amazon says it had no intention of discriminating. : also this week, taking a look at the gap, breathing new life into the gap, it is something that we have been talking about for some time. ellen: they have had quarter after quarter of disappointing result. but the problem that they are facing is that they are known for basics. and people loved them for
basics. but many other retailers have gotten into the basic business. and that is their problem. carol: i was thinking about all be times i walk into the gap and then walk right out. ellen: they were doing well when colored denim came in. nobody had colored denim. they went into the gap and spent money on colored denim. the plain t-shirts, you can get a lot of different places. carol: that is true. section, paul barrett looks at dodd-frank and how it is being eroded. people are trying to erode it through the court system. ellen: first republicans try to -- tried to eroded in the legislature, and that did not litigationhere was to try to water it down or change it. david: we talked to the reporter about his piece on dodd-frank. >> i think the people who are trying to make a substantive point instead of merely symbolic gestures are looking consistently to the courts where
they have had some success. in contrast to congress, where there has not been any success in knocking back dodd-frank. reporter: what have they had success with? reporter: most recently, a federal district court in washington reversed a very important decision by the financial stability oversight council. david: explain what that is first. oforter: that is a council sort of the powerful financial regulators in washington, and they have designated the oversight council, they designated it as a systemically important institution, fort sobanks that are so dig and interconnected, that their failure could bring down the system. is one of these, prudential,
and so forth, and the federal judges said the council had been arbitrary and capricious in exercising its authority and imposing this on metlife, and the potential significance of that is that it could undermine the council authority in future cases, because the judge said weigh more carefully the financial effects, and that is a very difficult thing for the council to do. dated: the financial protection bureau, which senator elizabeth warren headed before, and richard corbett has been the head of it for many years now, and that has been a target, as well, for the folks who opposed this law. reported on there is a case pending before the federal appeals court in washington, d.c., in which a mortgage lender called phh is challenging a
finding by the consumer protection bureau that it had arranged for kickbacks in mortgage reinsurance. it is a rather complicated case in an underlying sense, but the a penalty of some $109 million. myth, -- this, phh went well beyond getting the judgment against it reversed and challenged the constitutionality of the cfpb. carol: it was set up to be a watchdog in light of the crisis, pushed by senator elizabeth warren, and it is somewhat independent in terms of its financing. now, they are getting a lot of pushback. reporter: they are getting pushback, and it is being argued unaccountable, the
director of the agency, as you said, is able to draw his funds from the federal reserve. the appropriations process. secondly, can only be removed for cause by the president. so in other words, he does not serve at the pleasure of the president. he cannot be removed the way cabinet secretaries can be removed at any time, and this is being cobbled together into a constitutional argument, and the panel of the d circuit that heard this argument recently seen to that it was quite sympathetic to the constitutional argument. now, what exactly they will do about it is not 100% clear, but certainly, there is, in erie, and existential threat to the cfpb. carol: a focus on uber and the fight on how to classify its workers. david: we spoke to reporters josh. josh: that they are a technology
platform that is connecting drivers and customers but not in a legal sense the boss of those workers. david: what would it mean to uber if a court said, they are not independent contractors, they are your employees. uber. how does that change the financial picture for uber? josh: since the 1940's, u.s. law has provided a host of protections to people who are employees. ranging from benefits like minimum wage and overtime to be right to band together in forth a company to bargain collectively with you. and so, it would be a real sea change in the business model. carol: what to do the workers want to hear? josh: there is a range. one driver was quoted as saying on the one hand, they feel like they are the boss, and other
drivers have said, this is not a small business i am doing by being an uber driver. i do not have control over how much i charge or can give my business card and say, the next time you need a ride, call me, or any control over any kind of the things a small business owner would have with the kind of business they are running. we are really at the early stages of this. you have also had agencies in various states across the country come down in different areas and in some cases flip on appeal to one side of the other. do these people get unemployment benefits? that an employee would qualify for and and independent contractor would not. each side has lost some fights on this so far. the teamsters have been one of the key forces in putting forward this bill that passed citywide in seattle that would create a union-like structure for these drivers. it would not change their status under the law into employees, but it would create a whole new set
up where people, even if they are treated as independent contractors, could come together if they show they wanted, force -- and under city law, force a company like uber to negotiate with them. that is a model now being considered in the legislature at the statewide level in california. david: next up on "bloomberg businessweek" how turntables are going mainstream. and up market. carol: plus, using electronic guns to that on game competition. all of that ahead. ♪
carol: there is a story about a vegan cheese maker. david: vegan cheese? [laughter] carol: right, there are a lot of vegans who would like to have cheese, but they can't. anything connected with an animal. this is a company based in silicon valley. they are kind of disrupting the cheese market if you will. instead of using animal enzymes, our stomach enzymes, they are using plant enzymes and getting equipment from france to do it. it is really interesting. they have caught the attention of folks from whole foods. they got into whole foods last year and they did a personal tasting with john mackey one of the ceos of the company. david: they plan to grow if the vegan cheese catches on. carol: it is a huge market. the can she's is less than 1% of the cheese market. they are hoping to grow and the popular among various consumers.
david: all right, i will give it a try. carol: promise? david: promise. also, a company profiting on the popularity of old-school turntables. >> crossley is the largest turntable manufacturer in the world. last year, they sold one million turntables. that is the fifth of the market. david: they have gotten a lot of people interested in vinyl. what is their bread-and-butter? >> their bread and butter are the sort of turntables in the $100 range, 150 dollar range, and these are the turntables you see at places like urban outfitters, restoration hardware target, , walmart. they are the inexpensive, retro turntables that are plug and play with speakers attached and do not require any kind of stereo knowledge or setup. you buy it, take it home, and david: you have looked at this
history. they got a call from restoration hardware. what did that mean for the business? >> it changed it more for the dynamic of the customer, the demographic. prior to that, modern marketing concept was using the brand to sell turntables to the group that was still using them. and this was kind of older baby boomers who were nostalgic and wanted to use the records piling up in their basements and garages. so they sold old wooden jukebox-style turntable that appealed to dad. they were selling it at the skymall catalog and jcpenney. really, the unsexy side of the vinyl business. when restoration hardware came client what001 as a , it did, it started promoted and marketing the crossley turntables as a fashion accessory for largely female buyers. that was one of the factors that push the vinyl revival into the mainstream. with younger consumers.
david: they introduced this new turntable, you mentioned, vinyl has become a fashion accessory for a lot of people. they have gotten into it. is there evidence that with a higher end turntable that they will be successful and people will want to spend more money on a crossley turntable? >> it certainly remains an open-ended question. crossley, because of their mass success selling inexpensive turntables, has a reputation of a company that sells fun, but cheap stuff. and in the audiophile community, those who really know their stereos and are serious record collectors, they are kind of despised, because they can't even do damage to records, so what crossley is doing is trying to get those users, those familiar with their branding already, to trade up and stay with the brand. they have a huge installed user base something around 5 million crossley users over the past decade bought their turntables.
but will that take -- will those people make the leap when they decide to trade up and gain a greater appreciation for fidelity sound, or have the disposable income to do this? that is sort of the big question that this is hinging on. carol: next up, a market. david: how gps may be rewiring our brains. all that straight ahead on "bloomberg businessweek." ♪
♪ david: "bloomberg businessweek." welcome back to "bloomberg businessweek." i'm david gura. carol: i'm carol massar. video games, and one company is taking it to a whole new level. there is a counterstrike. >> the pro-videogame circuit has been dominated by a couple of big games. one game is counterstrike, which will be the subject of turner's new sports league, that will be the first entry into making -- mainstream television. david: so what is the game we are talking about? what is it? [laughter]
>> by the standards, it is easy to understand, there are two teams, a terrorist team and a counter insurgent team. and they basically run around and shoot at one another. they are trying to get rid of other team players. it is very popular. about three hundred 80,000 people are playing counterstrike at any one time, and it is also one of the main games used in this tournament, so it is certainly a big deal. : there are the secondary markets, and there is gambling that goes on. josh: it is interesting, because thatuse virtual weapons you can win in the game but could also buy through websites. those are essentially used as kind of like poker chips, so on these websites, you can say i , think team a is going to win. i will bet this gun and this
knife, and all seems very nice, but there is a very liquid second market, where those guns and knives have a cash value, so you are essentially betting money even though it feels abstract. david: is this raising eyebrows with regulators? is it a pretty unregulated industry right now? josh as far as i can tell, it is : not raising eyebrows among regulators, in part, it is really down there in the subculture. i think daily fantasy sports, as you mentioned, and it was on tv all of the time, and people understood that, but with this, you have to understand. is this kind of elaborate process through which you are taking guns and turning them into money and betting on things. it is a little bit mind blowing. carol: the gambling is illegal? ish: the gambling unregulated. sports betting is unregulated. sports betting is illegal in the united states. so, yes it certainly seems , illegal.
it is not been tested in court. does valve say? josh: valve doesn't say much. they have setup a system that has allowed this to happen. in the past, you have seen other game companies really make it impossible for you to take items within the game and get cash for them. they have made technical barriers. they have made it against terms of services. valve has gone the opposite way. they actually encourage the cash trade with their weapons. carol: they promote it? josh: they do promote it. they say it promotes engagement. they certainly have set up a system where it is possible. of the new world order, in this week's etc. section, there was a new report on how gps may be changing the composition of our brains. >> gps, according to some very suggestive research, fundamentally altering the structure of our brains. because if you think about it, we have been basically shutting them off and allowing gps to tell them
where to go, which is often why we end up driving our cars into lakes. so the book examines the history of gps. david do you even have a map in : your car anymore? carol: no. i do not have a map, and i have to say i put in addresses and , kind of follow it. even though i am saying, wait, i usually go this way. the history of gps is pretty interesting. >> it was invented by the air force. and the air force brass decided not to fund it because the already had a navigation tool. and they were like, this is actually pretty good, and the military tried to keep the best version for itself and give civilians a degraded version of it. edit actually wound up not being that big of a deal, because companies you know, like magellan and companies of you did not need to launch a missile with gps you , you can use a downgraded version to get you where you need to go. david: bloomberg best is
erik: coming up on "bloomberg best," the stories that shaped the week in business around the world. a meeting in doha disappoints, brazil's political crisis turns more contentious and investors mull from the ecb. >> the ecb has now done enough. erik: intel's cutbacks and alphabet's outlook. we cover the week in tech from a to z. >> for the most part, they are only appealing to people who speak english and can have profit growth. imagine that. >> no, they are growing.